On June 20^th, BMW cancelled a supply contract with Northvolt worth US$2.15Bn due to failed delivery targets. This announcement is yet another setback for European gigafactory ambitions, which have recently experienced multiple obstructions to proposed timelines.

On June 20^th, BMW cancelled a supply contract with Northvolt worth US$2.15Bn due to failed delivery targets. This announcement is yet another setback for European gigafactory ambitions, which have recently experienced multiple obstructions to proposed timelines.

According to Project Blue data, Northvolt currently has one gigafactory in operation, with two other gigafactories under construction in Europe and one under construction in Canada. With a current operating capacity of 16GWh, Northvolt’s only operating gigafactory in Skellefteå simply cannot meet the supply requirements for BMW’s order along with other commitments. As the cells for this were signed for in 2020, BMW has now “lost patience” with the progress of the project.

In addition to timeline challenges, BMW also mentioned that the quality of the cells is “not yet as expected”. It is immensely difficult to design and manufacture lithium-ion batteries, especially at the scale required for commercial production. What works at the pilot scale may not work as efficiently or successfully at the commercial scale. Cell inconsistencies and inadequate manufacturing throughput all raise costs of production and push timelines out further.

These problems are not unique to Northvolt however, as many European gigafactories are facing challenges with both scale-up and quality. This is also often seen across many battery supply chain projects in Europe and North America, where timelines are considerably longer when compared with China. China has spent billions of dollars on R&D and infrastructure over the past 20+ years and can scale up projects in 1-2 years. With a best-case of 3-5 years for Europe, this presents a major challenge for gigafactories such as Northvolt. Any delays to this timeline through manufacturing or permitting issues threaten current and future contracts, where OEMs such as BMW are not willing to absorb the risk associated with such projects. These OEMs inevitably then turn towards well-established players such as CATL to deliver high-quality cells on time, taking investment away from homegrown European projects. If these delays in Europe continue, then a vicious cycle may ensue that plays further into China’s hands.